I have forecast that we’ll see economically-driven U.S. riots by 2013. It seems I’ve been joined in that belief by Michael Bloomberg:

New York Mayor Michael Bloomberg warned Congress Friday, saying members should expect riots if the nation’s rate of unemployment remains above 9 percent.

“We have a lot of kids graduating college, can’t find jobs,” Mr. Bloomberg said on his weekly radio show. “That’s what happened in Cairo. That’s what happened in Madrid. You don’t want those kinds of riots here.”

This chapter discusses the history of option contracts from ancient times until the appearance of Theorie der Prämiengeschäfte by Vincenz Bronzin in 1908. The history examines the use of contracts with option features prior to the introduction of trade in free standing option contracts on the Antwerp bourse during the 16th century. Descriptions of the Amsterdam share option market by de la Vega in the 17th century and de Pinto in the 18thcentury are reviewed. The specific language of a late 17th century English option contract is provided in detail. The development and practice of option trading in the 18th and 19th centuries, as reflected in merchant manuals of that period, isexamined. The article concludes with an overview of late 19th century option trading in securities and commodities.

Still, São Paulo is a great place to be seeing out the global recession. Brazil’s economy is booming, and much of the benefit is being experienced lower down the income scale. My boss, Mike Reid, the editor of The Economist’s Americas section, who lived in São Paulo in the late 1990s, says that better diet and greater self-esteem mean that poor Brazilians stand noticeably taller now. One private-equity dealmaker told me his family’s maid and nanny have both started to sell cosmetics door-to-door in the evenings. He doesn’t think either will still be with him in six months. To hear a Paulistano complaining that you can’t get a good maid these days is to be reminded of Bertie Wooster’s constant fear that one of his friends would poach Jeeves. São Paulo is in the throes of a full-blown Servant Problem, and I feel privileged to witness it.

Some troubling revelations in Ron Suskind’s new book about the Obama administration’s handling of the financial crisis:

The book states Geithner and the Treasury Department ignored a March 2009 order to consider dissolving banking giant Citigroup while continuing stress tests on banks, which were burdened with toxic mortgage assets.

In the book, Obama does not deny Suskind’s account, but does not reveal what he told Geithner when he found out. “Agitated may be too strong a word,” Suskind quotes Obama as saying. Obama says later in the book that he was trying to be decisive but “the speed with which the bureaucracy could exercise my decision was slower than I wanted.”

Geithner says in the book that he did not recall that Obama was mad at him about the Citigroup decision and rejected allegations contained in White House documents that his department had been slow to enact the president’s plans.

…”The Citbank incident, and others like it, reflected a more pernicious and personal dilemma emerging from inside the administration: that the young president’s authority was being systematically undermined or hedged by his seasoned advisers,” Suskind writes.

People kept telling me I was an idiot for years [because] I didn’t invest in markets.

I don’t invest in the stock market because I think it’s a sucker’s game. I make my money and I put it in a repository [of value]. Or sometimes I just do these bets for entertainment, nothing else, so I can have a conversation with someone once in a while on a train or on a plane. That’s the only reason. So I stayed in cash, for years, and then realized that the value of my cash became monstrously high after the crisis. The last 12 years, the stock market did nothing, and cash yielded 40, 50, 60 percent.

Cash gives you an option when other people go bust. That’s what Kennedy did. Joe Kennedy, the father, got rich not from investments but from negative investments. In other words, he had no investment when other people were busted. [Take] the story of the two brothers [one of whom makes $4 per share a year while carrying no insurance against being wiped out, one of whom makes $2 per share with maximal insurance]. If the $2 brother can survive—without being kicked out by the board and replaced with some short-volatility fellow who doesn’t understand anti-fragility—then when the other brother goes bust, he’ll be able more aggressively to buy his inventory—his refrigerator, his car, everything, even his house—for nothing. You see the idea? So you have to think in terms of dynamics of cash: that it’s not a sissy trade.

There’s something called action bias. People think that doing something is necessary. Like in medicine and a lot of places. Like every time I have an MBA—except those from Wharton, because they know what’s going on!—they tell me, “Give me something actionable.” And when I was telling them, “Don’t sell out-of-the-money options,” when I give them negative advice, they don’t think it’s actionable. So they say, “Tell me what to do.” All these guys are bust. They don’t understand: you live long by not dying, you win in chess by not losing—by letting the other person lose. So negative investment is not a sissy strategy. It is an active one.